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A CONSUMPTION TAX A low-rate, broad-based consumption tax would raise the same amount of revenue...
ncpa.org ^ | Tuesday, September 06, 2005

Posted on 09/06/2005 7:21:12 AM PDT by InvisibleChurch

A CONSUMPTION TAX

Daily Policy Digest

TAXES

Tuesday, September 06, 2005

--------------------------------------------------------------------------------

As the President's Advisory Panel on Federal Tax Reform works on its report (due by the end of September), one of the measures under consideration is switching to a low-rate, broad-based consumption tax.

According to Alan J. Auerbach (University of California, Berkeley), a consumption tax could raise the same amount of revenue as the current tax system:

A shift to a consumption tax could increase Gross Domestic Product (GDP) in the long run by as much as 9 percent. Lower marginal tax rates would increase employment and therefore expand production somewhat in the short run. Over a longer period of time, production would increase even more as the result of stronger capital accumulation induced by the more favorable tax treatment of savings. Critics argue that adopting a consumption tax would raise asset values, but Auerbach says a consumption tax would actually reduce asset values somewhat in the short run:

A consumption tax eliminates the burden on saving and investment, a key reason why capital accumulation would rise; however, a consumption tax would actually increase the tax burden on existing assets because those who have accumulated assets in the past would face consumption taxes when selling their assets in order to consume goods and services. The purchasing power of accumulated assets would suffer, meaning the real (price-level adjusted) values would be lower than before; this feature of the consumption tax is sometimes referred to as a levy on “old” capital. Auerbach says not all consumption taxes are equal. Significant gains are possible even if the tax system retains its current degree of progressivity, though not if the tax reform also fully shields existing assets.

Source: Alan J. Auerbach, “A Consumption Tax,” Wall Street Journal, August 25, 2005.

For text (subscription required):

http://online.wsj.com/article/0,,SB112492381500022421,00.html

For more on National Sales Tax:

http://www.ncpa.org/iss/tax/


TOPICS: News/Current Events
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1 posted on 09/06/2005 7:21:14 AM PDT by InvisibleChurch
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To: InvisibleChurch
Take all those people displaced from New Orleans for example. Let's agree there numerous black folk who are now either out of a job and/or on welfare. One reason I'd expect a lot of them never started their own business (legal ones) was all the hassle of dealing with the gov't. Which, as I have said before, means that the current tax system in America is a bit racist if you borrow logic from Jesse Jackson.

The poor and minorities should be able to easily start and maintain their own businesses. Which is something a consumption tax would allow.

So, let's get rid of that racist income tax! :)

2 posted on 09/06/2005 7:28:11 AM PDT by isthisnickcool (If fire fighters fight fire and crime fighters fight crime what do freedom fighters fight?)
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To: InvisibleChurch; Taxman; pigdog; Principled; EternalVigilance; rwrcpa1; phil_will1; kevkrom; ...
A Taxreform bump for you all.

If you would like to be added to this ping list let me know.

John Linder in the House(HR25) & Saxby Chambliss Senate(S25) offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright and replace them with with a national retail sales tax administered by the states.

H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.

Refer for additional information:


3 posted on 09/06/2005 7:30:16 AM PDT by ancient_geezer (Don't reform it, Replace it!!)
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To: InvisibleChurch
The NCPA is a good conservative group when it comes to tax policy.

Click here to see one of its articles on the national sales tax.

4 posted on 09/06/2005 7:32:22 AM PDT by SolidSupplySide
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To: ancient_geezer
Is the proposed consumption tax rate 14.91%?
5 posted on 09/06/2005 7:35:16 AM PDT by kellynla (U.S.M.C. 1st Battalion,5th Marine Regiment, 1st Marine Div. Viet Nam 69&70 Semper Fi)
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To: InvisibleChurch
Screw this - it will never stop. A quarter percent here, an eighth there. A special sur-tax on certain products. We will never see the end.

IT IS NOT CONSERVATIVE.

6 posted on 09/06/2005 7:38:11 AM PDT by Nov3 ("This is the best election night in history." --DNC chair Terry McAuliffe Nov. 2,2004 8p.m.)
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To: kellynla

Would that include FICA? I doubt it...

Of course, Bush was aiming to completely change our SS system; that would have made the inclusion of SS unnecessary. However, it doesn't look like he's going to succeed, so we have to consider SS. Quite possibly, this projected consumption tax (which I am in favor of, btw) doesn't take that into account, because it seems awfully low to me. I've heard around 19%, including SS.


7 posted on 09/06/2005 7:40:15 AM PDT by livius
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To: InvisibleChurch

I like the idea of EVERYONE paying taxes,since we have to pay them at all, but I don't see this ever flying, as then those currently not paying any taxes will have to start paying and they'll pitch a hissy.


8 posted on 09/06/2005 7:45:03 AM PDT by southernindymom
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To: InvisibleChurch

Would this tax be on everything or would food be excluded?


9 posted on 09/06/2005 7:50:13 AM PDT by southernindymom
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To: Nov3

If it would support the same amount of spending, what would the point be?


10 posted on 09/06/2005 7:50:28 AM PDT by henderson field
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To: InvisibleChurch


A Constipation tax hardly seems fair.


11 posted on 09/06/2005 7:53:11 AM PDT by msnimje (CNN - Constant Negative Nonsense)
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To: henderson field

I suppose to level the playing field, so to speak, making the tax system the same for everyone. I don't see it happening, but it's sound good in theory.


12 posted on 09/06/2005 7:53:16 AM PDT by southernindymom
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To: SolidSupplySide; InvisibleChurch

The NCPA is a good conservative group when it comes to tax policy.

Click here to see their support of VATs with income taxes instead of retail sales taxes with income taxes repealed.

13 posted on 09/06/2005 8:11:21 AM PDT by ancient_geezer (Don't reform it, Replace it!!)
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To: kellynla

Is the proposed consumption tax rate 14.91%?

Replacing income taxes only and not SS/Medicare taxes that would be approximately the rate, revenue neutral with 1996-97 tax law.

Replacing both income and payroll taxes the proposed rate for the FairTax legislation is 23%.

14 posted on 09/06/2005 8:16:27 AM PDT by ancient_geezer (Don't reform it, Replace it!!)
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To: ancient_geezer

This would replace the now income tax, correct, or would this be in addition to?


15 posted on 09/06/2005 8:16:43 AM PDT by southernindymom
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To: InvisibleChurch
Dr. Auerbach mentions many positive aspects of moving from the communist inspired monster, the progressive income tax, we all suffer under to a consumption tax but fails to mention the CHIEF aspect of such a move.

F R E E D O M ! ! !

16 posted on 09/06/2005 8:17:35 AM PDT by Bigun (IRS sucks @getridof it.com)
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To: southernindymom
Would this tax be on everything or would food be excluded?

Probably just SUVs and air.

17 posted on 09/06/2005 8:21:41 AM PDT by InvisibleChurch (I support the firemen, but not their cause.)
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To: Nov3

"Screw this - it will never stop. A quarter percent here, an eighth there. A special sur-tax on certain products. We will never see the end.

IT IS NOT CONSERVATIVE."

I agree 100%.

The problem with the idea of Fair Tax or Consumption Tax or National Sales tax is that it ignores a basic fact. The States and the even some Counties and Cities want a share of the workers tax dollars.

A 24% National Sales tax will be supplimented by 6-12% State Sales Tax depending on the state, Counties and large Cities will tack on a 1-8% additional rate depending on area.

The states themselves are just as bad at sucking the workers tits as the federal government. I will bet anyone that you would have a true fight to get them to give up their Property Tax's

I noticed the supporters say that its up to the people to vote those electors out of office if the rates rise in any way. But sadley the elections of the past prove that the public has no intrest in doing those things today or in the future. The disaster in the South in the wake of Katrina proves to me that there are too many people in this country who believes that the Federal Government is their step father and mother. The demands for fedeal assistance and blaiming the government for not helping enough proves that to me.



Do I have the answer.. No.. but I believe that the state and federal governments need to start thinking of reducing their programs because they have grown to the point to where we can not longer substain the bill for them.


18 posted on 09/06/2005 8:27:37 AM PDT by Kitanis
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To: livius; kellynla

I've heard around 19%, including SS

Incorporating the Bush tax cuts and making them permanent would bring the rate down to between 19-20%. The 2003 calculation come in at 19.3%

See Table two: national FairTax rate calculation: 2003
http://www.fairtaxvolunteer.org/smart/tax_system.html


19 posted on 09/06/2005 8:29:57 AM PDT by ancient_geezer (Don't reform it, Replace it!!)
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To: ancient_geezer

okay, thanks


I'm all for a consumption tax but only after the IRS and ALL federal income taxes are eliminated. I don't want the clowns in DC adding a consumption tax and then saying "oops...we forgot to repeal the federal income tax."


20 posted on 09/06/2005 8:32:27 AM PDT by kellynla (U.S.M.C. 1st Battalion,5th Marine Regiment, 1st Marine Div. Viet Nam 69&70 Semper Fi)
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